Supervising Defined Benefit (DB) transfers has been a key priority for us since the pension reforms, commonly known as the ‘pension freedoms’, were introduced in 2015. We summarise our work to date and how we continue to supervise this area.
Defined Benefit pension schemes provide members with a guaranteed income in retirement, which we consider important and valuable benefits for members of these schemes. Advice on whether or not to transfer a DB pension is complex and requires specialist resources. Since the 2015 pension freedoms, advice in this area has been mandatory for any transfer with a value over £30,000.
Supervising DB transfers
We published updates on our work in 2017 and 2018, and have conducted specific work into advice provided to members of the British Steel Pension Scheme.
We have taken significant action against firms who have not met the standards of advice and behaviour expected for financial advice. Where we suspected serious misconduct we have opened enforcement investigations.
Focusing on the most active firms
The DB transfer market is significant in terms of both the number of people and monetary values involved. In 2018 we issued a data request to all firms with pension transfer advice permissions. Our high level findings are published in our market-wide data results reviewing DB pension transfers. This data enabled us to build a more comprehensive picture of the pension transfer advice market: advice was provided on £82.8bn of transfers, with 162,047 members being recommended to transfer their pension.
This data gives us the information we need to focus our continuing supervision of firms and drive up the quality of advice. By focusing on firms where the risk of poor practice is highest, we can prevent consumer harm in future. We can do this by working with the firm, or stopping it carrying out activities until our concerns are resolved. It may also involve more formal action if that is required.
We are also planning work to improve understanding of the DB pension transfer market. This will include working with firms, market-wide campaigns, and industry seminars and meetings with key people and organisations.
Our rules and guidance provide a framework through which suitable advice can be given, however we will not hesitate to take action where firms have not heeded our messages and are presenting harm to consumers.